Rapid-fire trading strategies can actually cost investors money, with some losing as much as a million euros per day, according to a report Sunday, March 1, 2026 (09:15) by De Telegraaf.
The practice, known as flash trading, utilizes extremely fast algorithms and physical proximity to exchanges to open and close positions within milliseconds. These trading bots primarily capitalize on small price discrepancies and information advantages in segmented markets, allowing them to “front-run” orders – a tactic known as latency arbitrage – and create short-term price pressures.
This speed can result in worse execution prices and increased trading costs for both individual investors and some institutions. Cumulatively, these costs can amount to millions of euros annually for large funds.
Flash traders employ techniques such as co-location – placing servers close to exchange infrastructure – advanced smart order routers, and the use of numerous small limit and market orders to profit from minimal price differences. Market features like maker-taker fees, hidden orders, and varying trading windows further enhance opportunities for these high-frequency traders.
While their activity can sometimes provide short-term liquidity, that liquidity often disappears when market stress increases, leading to counterparty risks and slippage for slower participants. The findings highlight the complexities of modern market structure and the potential disadvantages faced by investors lacking the same technological capabilities.
Value investors and buy-and-hold investors approach the market differently, focusing on fundamental company values and utilizing larger, diversified orders. They also employ execution algorithms like VWAP/TWAP, dark pools, or negotiated rates to minimize market impact and visibility. By prioritizing patience and a longer-term perspective, they avoid the most detrimental effects of latency arbitrage and unnecessary trading expenses.
Regulators and market initiatives are exploring potential solutions, including consolidating price transparency, implementing “speed bumps,” tightening rules on order types, and improving reporting requirements under MiFID and similar regulations.
According to a report from Headliner.nl, these forms of flash trading can even delay the processing of important market news, potentially costing traders up to a million euros per day.
